As the Act comes into force, is your state RERA-compliant?

The Real Estate (Regulation and Development) Act, 2016 (RERA) came into effect from May 1, 2017.

The Real Estate (Regulation and Development) Act, 2016 (RERA) came into effect from May 1, 2017.

The Real Estate (Regulation and Development) Act, 2016 (RERA) came into effect from May 1, 2017. However, the Act that is likely to bring in accountability and transaprency in the sector, has still not been implemented by many states. According to Crisil, despite continuous monitoring and follow up by the Ministry of Urban Development and Housing, Government of India, only nine states (Andhra Pradesh, Bihar, Gujarat, Kerala, Madhya Pradesh, Maharashtra, Odisha, Rajasthan, and Uttar Pradesh) and six union territories (Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, Lakshadweep, and National Capital Territory of Delhi) have notified their respective Real Estate (Regulation and Development) Rules, 2017. States were asked to prepare and notify respective rules in tandem with the Act, so it could be effectively implemented.

Crisil Research has also compared the notified state specific rules with the central Act, and found that many states have either diluted a few crucial aspects of the Act, or given insufficient emphasis to its provisions in their rules.

Below are some of the observations from Crisil report:

What are the provisions that have been altered/diluted
– Definition of ongoing projects: RERA 2016 includes projects that are ongoing on the date of commencement of the Act (i.e., May 1, 2017), and for which the completion certificate has not been issued. However, Andhra Pradesh, Kerala and Uttar Pradesh have altered this definition in their notified rules.

– Penalties for non-compliance with the Act: RERA 2016 recommends imprisonment for a term which may extend up to three years, or fine which may extend up to 10% of the estimated cost of the real estate project, or both, in case of non-compliance with the Act. However, most states have added a clause of compounding of offence to avoid imprisonment.

-Payment schedule and liability in case of structural defects: According to the central legislation, the model sale agreement is required to specify 10% advance payment, or charge an application fee from buyers, while entering into a written agreement for sale. In addition, in case of any structural defects arising within five years of handing over the possession of project to buyers, developers will be liable to rectify such defects without further charge. However, there is no clarity on these clauses in most states’ RERA notifications.

Includes ongoing projects with conditions: excludes projects where roads, open spaces, amenities and services have been handed over to the local authority in layout projects, or where all slabs are laid in housing projects, or where all developmental works have been completed and sale/lease deeds of 50% of the apartments/houses/plots have been executed, or where development works have been completed and application has been filed to the competent authority for issue of completion or occupancy certificate.

Penalties for non-compliance: Diluted Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty. *Payment schedule: In line 10% advance payment, or an application fee from buyers while entering into a written agreement for sale.

Norms for escrow withdrawal: In line 70% of the amount realised by developers to be deposited in a separate account; withdrawal in proportion to the percentage of project completed.

Clause for structural defects: In line Time frame – defects arising within five years from possession; developers to rectify such defects without further charge within thirty days.

BIHARRERA notified on: 27 April 2017

Definition of ongoing projects: In line Includes projects that are ongoing on the date of commencement of the Act, and for which the completion certificate has not been issued.

Penalties for non-compliance: Diluted Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty.

Payment schedule: Lacks clarity in the notified rules

Norms for escrow withdrawal: In line 70% of the amount realised by developers to be deposited in a separate account; withdrawal in proportion to the percentage of project completed.

Clause for structural defects: In line Time frame -within five years from possession; developers to rectify such defects without further charge within thirty days.

GUJARATRERA notified on: 29 October 2016

Definition of on-going projects
Not mentioned in the notified rules

Penalties for non-compliance: Not mentioned in the notified rules

Payment schedule: Not mentioned in the notified rules

Norms for escrow withdrawal: Not mentioned in the notified rules

Clause for structural defects: Not mentioned in the notified rules

KERALA

RERA notified on: 3 February 2016

Definition of ongoing projects: Diluted Includes ongoing projects with conditions: Excludes all on-going projects where the promoter has received all requisite approvals/permits for the development of the real estate project prior to the commencement of the Act.

Penalties for non-compliance: In line Imprisonment for a term which may extend up to three years, or with fine which may extend up to 10% of the estimated cost of the real estate project, or both.

Payment schedule: In line 10% advance payment, or an application fee from buyers while entering into a written agreement for sale.

Norms for escrow withdrawal: Diluted 70% (or less, as notified by the government) of the amount realised by developers to be deposited in a separate account; no clarity on withdrawal mechanism.

Clause for structural defects: Diluted

Time frame – Within five years from possession; developers to rectify such defects without further charge within thirty days.

MADHYA PRADESH

RERA notified on: 22 October 2016

Definition of ongoing projects: In line Includes projects that are ongoing on the date of commencement of the Act, and for which the completion certificate has not been issued.

Penalties for non-compliance: Diluted Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty.

Payment schedule: Not mentioned in the notified rules

Norms for escrow withdrawal: No clarity in the notified rules

Clause for structural defects: Not mentioned in the notified rules

MAHARASHTRARERA notified on: 20 April 2017

Definition of on-going projects: In line Includes projects that are ongoing on the date of commencement of the Act, and for which completion certificate has not been issued.

Penalties for non-compliance: Diluted Does not mention imprisonment penalties; no clarity on monetary fines/penalties as percentage of total project cost.

Payment schedule: In line, but with conditions 10% advance payment or an application fee from buyers while entering into a written agreement for sale; model agreement mandates buyers to pay up to 30% of total consideration on execution of agreement, and additionally, up to 15% of total consideration on completion of plinth work. Remaining payment to be as per clauses mentioned in the model sale agreement.

Norms for escrow withdrawal: In line 70% of the amount realised by developers to be deposited in a separate account; withdrawal in proportion to the percentage of project completed.

Clause for structural defects: In line Time frame – Within five years from possession; developers to rectify such defects without further charge

ODISHARERA notified on: 25 February 2017

Definition of on-going projects: In line Includes projects that are ongoing on the date of commencement of the Act and for which the completion certificate has not been issued

Penalties for non-compliance: Diluted Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty.

Payment schedule: No clarity in the notified rules

Norms for escrow withdrawal: In line 70% of the amount realised by developers to be deposited in a separate account; withdrawal in proportion to the percentage of project completed.

Clause for structural defects: In line Time frame: Within five years from possession; developers to rectify such defects without further charge within thirty days

RAJASTHAN RERA notified on: 1 May 2017

Definition of on-going projects: In line Includes projects that are ongoing on the date of commencement of the Act, and for which the completion certificate has not been issued

Penalties for non-compliance: Diluted Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty.

Payment schedule: In line 10% advance payment, or an application fee from buyers while entering into a written agreement for sale.

Norms for escrow withdrawal: In line 70% of the amount realised by developers to be deposited in a separate account; withdrawal in proportion to the percentage of project completed.

Clause for structural defects: No clarity on number of years

Time frame: No clarity on number of years from possession; developers to rectify such defects without further charge

UTTAR PRADESHRERA notified on: 27 October 2016

Definition of ongoing projects: Diluted Includes ongoing projects with conditions: excludes projects where:
– services have been handed over to the local authority for maintenance
– where common areas and facilities have been handed over to the association or resident’s welfare association for maintenance
– all development works have been completed and sale/ lease deeds of 60% of apartments/plots/houses have been executed; and
– where all development works have been completed and application has been filed with the competent authority for issue of completion certificate.

Penalties for non-compliance: Diluted Compounding of offence clause included to avoid imprisonment; 10% of project cost as penalty

Payment schedule: No clarity in the notified rules *Norms for escrow withdrawal: In line 70% of the amount realised by developers to be deposited in a separate account; but no clarity on withdrawal mechanism

Clause for structural defects: No clarity in the notified rules

ANDAMAN and NICOBAR ISLANDSRERA notified on: 31 October 2016In line with central Act

At least one representative state from East, West, North, South and Central, yes. Nice to see that not even one of the North Eastern states makes it to the list. And this in an article in a "National" newspaper. That was good messaging and very inclusive.